Thursday, April 26, 2012

The Facts Are In: Stimulus Worked - Republican Plan Fails

Following his string of primary victories on Tuesday, Mitt Romney took to the podium and rallied the Republican faithful. In a scathing criticism of President Obama’s economic policies, he said, “It’s still about the economy ... and we’re not stupid.”

I sincerely hope he’s right in saying that the American people are not stupid.

I also sincerely hope that people follow the advice he gave on February third, “If people think the economy is going in the right direction they should vote for President Obama.”

President Obama has bucked the trend of western democracies following the financial collapse of 2008. He has been skewered for “a failed stimulus” while Republicans have advocated massive spending cuts as embodied in the proposed “Ryan budget” that Romney has endorsed.

Republicans and their sympathizers repeatedly warned of the dangers of a “double dip recession” that would result from continued spending. In the meantime the Europeans embraced the policies of austerity and massive cuts in government spending – precisely the Republican plan for solving America’s economic woes.

Well, the results of the two diametrically opposed programs are in. And, if the American people are not stupid, they will dispassionately look at the facts and render a judgment in favor of President Obama.

Yesterday Bloomberg News reported, “The U.K. economy shrank in the first quarter as Britain slid into its first double-dip recession since the 1970s, forcing Prime Minister David Cameron to defend his spending cuts in Parliament.”

As The O’Zone  reported on February 4, “…the impact of the policies which Republicans advocate can be demonstrated. Their nostrums of cutting government spending and fiscal austerity have been implemented throughout most of Europe since the 2008 meltdown. The following chart from the European Commission shows the comparative unemployment statistics for The European Union (27 countries), the Euro-Area (17 countries), Japan and the United States.”


What yesterday’s news does is amplify the consequences of austerity policies that Republicans have advocated. While it could be argued that much of the problem within the Euro-zone resulted from the heavy debt burden carried by countries such as Spain, Greece, Italy, Ireland and Portugal, such was not the case with Great Britain.

The austerity policies not only have resulted in an increase in unemployment in the U.K. and the rest of Europe. They have resulted in a decline in real GDP, while under the stimulative policies of the Obama administration U.S. GDP has moved upward.

As the Daily Kos reported, “Behind it all is European austerity policy, the very stuff Republicans in the United States have been promoting for the past three-plus years. If they'd won the election in 2008 and imposed their proposals, you could add the U.S. to those nations who are now seeing so much economic damage. Indeed, it is unlikely the U.S. would have emerged from recession as it "technically" did in mid-2009. The policies the GOP objected to, particularly the economic stimulus package put forth and barely passed by Congress shortly after Barack Obama took the oath as president, have made a big difference even though they were not nearly as vigorous as truly needed to deal with the depth of the Great Recession. The GDP chart above shows the difference.”

However, there is a real danger that the U.S. is going to be impacted by the situation in Europe. As Robert Reich noted yesterday:

Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest….
… goods and services slosh across the globe. If there’s not enough demand for them coming from the second and third-largest economies in the world, demand in the U.S. can’t possibly make up the difference. That could mean higher unemployment here as well as elsewhere.
What’s the problem with Europe? Don’t blame it on the so-called “debt crisis.” There was no debt crisis in Britain, for example, which is now experiencing its first double-dip recession since the 1970s.
Blame it on austerity economics – the bizarre view that economic slowdowns are the products of excessive debt, so government should cut spending. Germany’s insistence on cutting public budgets has led Europe into a recession swamp.

So the evidence is in. While the U.S. has, at least in part, followed the Obama course of economic stimulus, Europe has followed the Republican-advocated policies of cutting spending. The reality is clear – not only are we better off than we were when President Obama took office, we are better off than we would have been under the policies that the Republicans embrace and Europe has followed.

I hope that Mr. Romney is right in saying that the American people are not stupid.

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